Workers' Compensation Policies for Texas Employers

Understanding workers' compensation policies is crucial for Texas employers to protect their employees and business interests. Unlike other states, Texas allows private employers to opt out of carrying workers' compensation insurance, a choice that carries significant implications. 

As of recent data, approximately 28% of Texas employers have chosen not to participate in the state's workers' compensation system. This decision affects about 6% of Texas employees, leaving them without optimal coverage. 

Employers who opt out face increased liability, as they can be directly sued by employees for workplace injuries, potentially leading to substantial financial burdens. 

Given that serious nonfatal workplace injuries cost employers over $1 billion weekly in direct expenses nationwide, it's imperative for Texas employers to thoroughly understand the risks and benefits associated with their choice regarding workers' compensation coverage. Let’s get started!

What are Workers' Compensation Policies in Texas?

In Texas, workers' compensation policies differ from those of most other states because Texas does not require most private employers to carry workers' compensation insurance. However, if an employer opts into the system, they gain legal protections, and employees receive benefits if injured on the job.

Let’s dive into the specifics of what makes Texas so unique in this regard.

Key Aspects of Workers' Compensation Policies in Texas

Texas does not require private employers to carry workers' compensation insurance. However, businesses that opt in receive legal protections, while those that opt out (non-subscribers) assume legal liability. Below are the key aspects of workers’ compensation policies in Texas.

1. Optional Workers' Compensation Coverage

Texas allows private employers to decide whether to carry workers’ compensation insurance.

• Employers that opt-in:
  
  • Receive legal protection from most employee lawsuits.
  • Provide employees with medical and wage replacement benefits.
• Employers that opt out (Non-Subscribers):
  
  • Must notify employees and the Texas Division of Workers’ Compensation (DWC).
  • Can be sued directly for workplace injuries.
  • May offer alternative injury benefit plans.
• Exceptions:
  
  • Public employers (e.g., government agencies) are required to carry workers' compensation.
  • Construction companies working on government projects must have coverage.

2. Oversight by the Texas Department of Insurance (TDI) and the Division of Workers’ Compensation (DWC)

The DWC, under the Texas Department of Insurance (TDI), oversees workers' compensation regulations.

• Employees must report workplace injuries to their employer within 30 days to qualify for benefits.
• Employees must file a claim with the DWC within one year of the injury date.
• Disputes over claims can be resolved through mediation or hearings managed by the DWC.

3. Legal Implications for Employers

For Employers Who Carry Workers' Compensation:

• Limited Liability for Workplace Injuries: Employers who carry workers' compensation insurance are generally protected from lawsuits related to workplace injuries. This means that employees cannot sue the employer for additional damages outside of the benefits provided by the workers' compensation system.
• Exclusive Remedy Rule: Employees who are covered by workers' compensation must rely on the benefits provided by the system rather than filing a lawsuit for their injuries. This prevents employees from suing for pain and suffering, punitive damages, or other claims not covered under the workers' compensation program.

For Non-Subscribers (Employers Who Do Not Provide Workers' Compensation):

• Exposure to Lawsuits: Employers who choose not to carry workers' compensation insurance may be subject to lawsuits from employees who suffer work-related injuries. Employees have the right to sue for damages, which can result in higher financial liability for the employer.
• Loss of Legal Defenses: Non-subscribers lose certain legal defenses available to employers who carry workers' compensation. For instance, they cannot use defenses like contributory negligence (arguing that the employee's own actions contributed to the injury) to reduce their liability in a lawsuit.
• Alternative Benefit Plans: Non-subscribers can establish their own injury benefit plans or compensation programs, but these do not offer the same legal protections as state-regulated workers' compensation. These private plans may not fully shield employers from lawsuits or offer employees the same level of financial security.

4. Industry-Specific Considerations

Certain industries have additional workers' compensation requirements:

• Construction Companies: When working on government projects, construction firms must provide workers' compensation coverage for their employees. This is especially critical as construction sites are inherently hazardous, with a higher likelihood of workplace injuries. Ensuring coverage helps companies stay compliant with regulations and protects workers in case of accidents or injuries on the job.
• High-Risk Industries (Oil, Gas, and Transportation): Sectors like oil and gas or transportation deal with highly dangerous environments where employees are exposed to significant safety risks. Workers' compensation coverage in these industries is crucial for managing the high costs associated with workplace accidents and injuries. Coverage helps mitigate the liability for employers, protecting both their workers and business operations.
• Healthcare and Retail Employers: Healthcare facilities and retail businesses also face unique risks. Healthcare workers often deal with infectious diseases, physical strain, and exposure to hazardous materials, making workers' compensation essential for managing medical expenses and lost wages in case of injury. Similarly, retail employers need coverage to address the frequent risk of slips, falls, and other injuries, protecting their workforce and minimizing operational disruptions.

Texas allows private employers to determine whether to provide workers’ compensation coverage. Employers that opt in receive legal protections and structured benefits for employees, while non-subscribers assume greater legal responsibility and must implement alternative solutions.

Also read: Verification of Workers' Compensation Certificate of Insurance

Let's now delve into the types of benefits you or your employees can expect!

Benefits You Get Under Workers' Compensation in Texas

Employers that provide workers' compensation in Texas offer specific benefits to employees who suffer job-related injuries or illnesses. These benefits include medical coverage, wage replacement, and additional compensation for permanent disabilities or fatalities.

1. Medical Benefits

Workers' compensation covers all necessary medical expenses related to a workplace injury or illness.

• Includes doctor visits, surgeries, hospitalization, prescriptions, therapy, and rehabilitation.
• No out-of-pocket costs for the employee if treatment is from an approved provider.
• Employees must use healthcare providers within the employer’s workers’ compensation network, if applicable.

Example: If an employee injures their back while lifting heavy machinery, their workers' compensation coverage would pay for their hospital visit, any required surgeries, pain management treatment, and physical therapy sessions needed for recovery.

2. Income Benefits (Wage Replacement)

If an employee is unable to work due to a work-related injury, they may receive partial wage replacement through one of the following types of income benefits:

a. Temporary Income Benefits (TIBs)

• Provided when an employee is unable to work for more than seven days due to injury.
• Pays 70% of the difference between pre-injury wages and post-injury earnings.
• Benefits continue until the employee returns to work, reaches maximum medical improvement (MMI), or reaches the 104-week limit.

Example: If an employee falls from a ladder and breaks their arm, they may receive TIBs, covering 70% of the difference between their pre-injury wages and the earnings they make while recovering.

b. Impairment Income Benefits (IIBs)

• Paid when an injury results in a permanent impairment.
• The amount is based on the Impairment Rating (IR) assigned by a medical professional.
• Paid at 70% of the employee’s average weekly wage for three weeks per 1% of impairment rating.

Example: If an employee loses a finger in an industrial accident, IIBs would be provided based on the Impairment Rating (IR) assigned by a medical professional.

c. Supplemental Income Benefits (SIBs)

• Available if an employee has a 15% or greater impairment rating and cannot earn at least 80% of pre-injury wages.
• Paid at 80% of the difference between pre-injury and post-injury wages.
• Employees must apply for SIBs every quarter.

Example: If an employee with a serious knee injury cannot return to their previous job as a construction worker, they may be eligible for SIBs to replace a portion of their lost income.

d. Lifetime Income Benefits (LIBs)

• Reserved for employees with severe, permanent injuries, including:
  
  • Total loss of sight in both eyes.
  • Loss of both hands, feet, or a combination of both.
  • Paralysis (quadriplegia or paraplegia).
  • Severe brain injuries preventing independent function.
• Paid at 75% of the employee’s average weekly wage, with a 3% annual increase.

Example: If an employee is paralyzed due to an accident at work, they may receive LIBs, providing 75% of their average weekly wage with a 3% annual increase.

3. Death and Burial Benefits

If an employee dies due to a work-related injury or illness, death benefits provide financial support to dependents.

• Death benefits:
  
  • Paid to the spouse, children, or other eligible dependents.
  • Equal to 75% of the deceased worker’s average weekly wage.
  • Benefits continue for life for a surviving spouse (unless they remarry, in which case a lump sum is paid).
  • Children receive benefits until they turn 18 (or 25 if enrolled in college).
• Burial benefits:
  
  • Covers up to $10,000 for funeral expenses.

Example: If an employee dies in a construction accident, their spouse and children may receive death benefits that replace a portion of the worker’s wages to support the family.

4. Vocational Rehabilitation and Return-to-Work Programs

If an employee is unable to return to their previous job, vocational rehabilitation services may be available.

• Job training, skill development, and workplace modifications.
• Assistance in finding alternative employment if the employee cannot return to their previous role.
• Programs may include physical therapy and counseling for work adjustments.

Example: If an employee who was previously a mechanic can no longer perform the physical tasks required for the job after an injury, they may receive training to transition to a desk-based job, such as customer service or administrative work.

Workers' compensation in Texas provides medical care, wage replacement, disability benefits, and financial support for employees who suffer job-related injuries or illnesses. Employers offering coverage ensure injured employees receive necessary benefits while limiting legal liability.

Take a look at our guide on Understanding Texas Liability Auto Insurance Coverage to ensure you have the right coverage in place.

Wondering how you can stay compliant? Here’s what you need to know.

Considerations and Compliance for Employers Under Texas Workers' Compensation

Texas allows private employers to choose whether to provide workers’ compensation insurance. Employers that opt-in must follow state regulations, while those that opt out must take additional steps to manage liability. Below are key considerations and compliance requirements for employers.

1. Coverage Options for Employers

Employers can either:

• Opt into the Texas Workers' Compensation System – Provides legal protections and structured benefits for injured employees.
• Operate as a Non-Subscriber – Assumes full liability for workplace injuries and must establish alternative benefit plans or risk lawsuits.

2. Compliance Requirements for Employers Who Opt In

Employers that choose to provide workers’ compensation insurance must:

• You can obtain coverage through a private insurance carrier, the TWFG Khan Insurance, or self-insurance if you are a qualifying large employer.
• Report injuries to the Texas Division of Workers' Compensation (DWC) and insurance provider within eight days.
• Post notices in the workplace informing employees of their workers' compensation rights.
• Provide employees written notice of their rights and responsibilities under the policy.
• Work with insurance carriers to facilitate claims and ensure injured employees receive benefits.

3. Compliance Requirements for Non-Subscribers

Employers who choose not to carry workers' compensation must:

• Notify the Texas Division of Workers’ Compensation (DWC) annually using Form DWC-005.
• Provide written notice to all employees about the absence of workers’ compensation coverage.
• Post workplace notices stating that the business does not carry workers' compensation.
• Accept legal liability for workplace injuries, as employees can file lawsuits against the employer.

4. Injury Reporting and Claims Process

Employers must follow specific guidelines for workplace injury reporting and claims management.

• Employees must report workplace injuries within 30 days of the incident.
• Employers must file the First Report of Injury (DWC-001) within eight days of becoming aware of an injury resulting in lost work time.
• If there is a dispute over benefits, the case may be resolved through mediation, administrative hearings, or legal proceedings under the Texas Department of Insurance (TDI).

5. Employer Protections and Legal Considerations

Employers Who Provide Workers' Compensation

• Gain protection from most employee lawsuits.
• Employees must use the workers' compensation system for claims rather than suing the employer.
• Employers must maintain compliance with all state reporting and coverage regulations.

Non-Subscriber Employers

• Face higher legal risks since employees can sue for workplace injuries.
• Lose traditional legal defenses, such as contributory negligence.
• Must demonstrate that they provided a safe working environment to defend against claims.

Employers in Texas must carefully evaluate whether to provide workers’ compensation insurance or operate as a non-subscriber. Opting in ensures compliance with state regulations and offers legal protections, while non-subscribers must take additional measures to manage liability and worker benefits.

Essential read: Injuries Not Covered by Workers' Compensation Insurance

Now, let's explore how TWFG Khan Insurance can be your guide through this intricate process.

How TWFG Khan Insurance Supports You

At TWFG Khan Insurance, we offer expert guidance to help businesses secure the right workers' compensation coverage. Here’s how they can assist.  Our goal is to simplify the process and ensure you get coverage tailored to your specific needs.

offers expert guidance to help businesses secure the right workers' compensation coverage. Here’s how they can assist:

1. Personalized Consultation
   We assess your business’s needs and recommend coverage tailored to your industry, ensuring proper protection for your workforce.
2. Expert Knowledge of State Regulations
   TWFG Khan stays updated on Texas regulations, ensuring compliance with workers' compensation laws and avoiding fines.
3. Comprehensive Coverage Options
   We offer policies covering medical benefits, wage replacement, rehabilitation, and more, giving full protection to both employees and businesses.
4. Affordable Rates with Risk Management
   TWFG Khan helps secure competitive rates and provides risk management strategies to reduce workplace injuries and potentially lower premiums.
5. Ongoing Support
   We guide you through claims management, ensuring timely employee benefits and support after an injury.

Your business deserves reliable, hassle-free coverage. Let’s secure the right policy for your employees and financial well-being. Get a quote from TWFG Khan Insurance today!

Conclusion

Texas workers' compensation policies offer employers unique flexibility, allowing them to choose between state-regulated coverage and alternative risk management strategies. While opting into workers’ compensation provides structured benefits and legal protections, non-subscribers must navigate increased liability and compliance requirements. Regardless of the choice, ensuring workplace safety and supporting employees in case of injury remains a top priority.

For businesses seeking guidance on workers' compensation and other insurance needs, TWFG Khan Insurance provides expert assistance in finding tailored coverage solutions. Whether you need traditional workers' compensation insurance or alternative coverage options, our team can help protect your business and employees.